FNB and Nedbank crush Absa and Standard Bank in PayShap prices

First National Bank (FNB) and Nedbank currently offer the best prices on PayShap transactions, a MyBroadband analysis reveals.

BankservAfrica and the Payments Association of South Africa (Pasa) launched the new real-time payments service earlier today with Absa, FNB, Nedbank, and Standard Bank.

Banks supporting the PayShap protocol let customers link their cellphone numbers to their bank accounts.

People can then use these “ShapIDs” instead of bank account numbers to receive money.

Banks refer to this as a “proxy payment”, where your ShapID acts as a stand-in or proxy for your bank account number.

When making a regular EFT using a bank account number, customers can pay extra for immediate interbank payments.

With PayShap, all transactions are real-time. If you want to pay using someone’s ShapID, you have no option to turn off real-time payments.

As the table below shows, if you bank with Absa and Standard Bank, non-realtime EFT is far more cost-effective than PayShap.

Unless you desperately need the payment to clear immediately, banks offer almost no incentive to use PayShap.

Absa also charges R45 for transactions over R1,000 — disincentivising using PayShap for large-value transfers.

FNB and Nedbank, on the other hand, have launched with cheaper PayShap tariffs than their rivals.

Nedbank charges a flat R1 fee for all ShapID-to-ShapID transactions, offering a substantially cheaper alternative to regular immediate interbank payments.

PayShap transactions to regular bank account numbers are billed at R7.50 each, like Standard Bank.

Nedbank is also running a promotion where all PayShap transactions are free until 30 April 2023.

FNB is offering free PayShap transactions for amounts below R100, making it the only bank actually testing the system as a cash replacement outside of Nedbank’s promotional window.

Transactions over R100 are billed a flat R6 each, once again making them cheaper than regular immediate payments but more expensive than EFT.

Queried about the prices, Absa’s Everyday Banking managing executive for consumer products, Christine Wu, told MyBroadband that their prices are competitive.

“At the heart of Absa’s pricing philosophy with regards to PayShap was to make micro-payments affordable and to encourage early adoption, particularly for low-value transactions,” Wu stated.

“To this end, PayShap payments for amounts less than R200 only cost R2.50 per transaction, which is one of the most affordable in the market for low-value transactions regardless of whether the payment is made to a ShapID or a bank account.”

The table below shows that FNB and Nedbank are both cheaper for low-value PayShap transactions than Absa.

BankservAfrica marketing content manager Wendy du Preez said their role isn’t to set retail prices, but to help provide the payment rails.

“The sentiment that was shared at the launch today was that the competitive nature of the banks should drive down the pricing,” Du Preez said.

“That said, from a BankservAfrica perspective, our role is at the centre, which is to provide the clearing infrastructure in accordance with the National Payment System rules and the PayShap Scheme Rules that govern the PayShap services.”

FNB’s EFT product house chief, Ravi Shunmugam, explained that various factors went into setting the initial PayShap transaction fees.

He said that broadly, prices are determined by adding cost, margin, and a risk premium.

Costs include what the banks must pay BankservAfrica to use the PayShap rails.

The margin is a complex calculation to ensure the bank can continue investing in developing PayShap and return a profit.

Shunmugam explained PayShap has the broader objective of modernising South Africa’s ageing payments infrastructure.

“The real-time clearing system was designed in 2006, and EFT before that even,” he told MyBroadband.

PayShap offers real-time payments clearing in under ten seconds, and Shunmugam said they are required as banks to invest in the central platform Bankserv provides.

“[With calculating the margin,] we must be able to recoup and continue investing in the modernisation of these rails,” said Shunmugam.

Regarding the risk premium, Shunmugam explained they currently only have jurisdictions where real-time payments have been implemented, like the UK and Brazil, to draw experiences from.

In both those cases, there was a short-term increase in fraud and financial crime — something South Africa’s banks want to avoid.

“PayShap’s rollout needed network-level fraud controls,” he explained.

“We’re still going to enhance that between now and September with a further 22 deployments going into fraud at Bankserv.”

Absa’s Wu also mentioned the risk premium.

“Transactions exceeding [R1,000] carry more risk and, for now, we have priced them at a premium to low-value transactions,” she said.

“We will closely monitor consumer adoption and usage and adjust our pricing in time to ensure it remains relevant and competitive to our customers.”

Shunmugam said they expect PayShap transaction prices to decrease over time as the risks and other factors around the system are better understood.

Cash handling is expensive, and he explained that they hope to translate the benefit of dealing with less cash into lower PayShap transaction fees over time.

MyBroadband contacted Nedbank and Standard Bank for comment, but they did not respond by publication.

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